The Labuan International Business and Financial Centre (Labuan IBFC) has contributed more than RM1 billion to the country’s fiscal revenue in 2022, said the Former Deputy Finance Minister Steven Sim. This gentleman is someone I used to admire for his work with constituents. But his answers were bizarre as you may note below:
“Labuan IBFC is one of the three major international financial centres in Asia-Pacific focused on external banking, reinsurance and captive insurance companies (apart from Singapore and Hong Kong).
“Labuan has 70 banks that conduct external banking, Singapore has 99 and Hong Kong has 61,” he said during a question-and-answer session in the Dewan Rakyat.
On insurance and insurance-related companies, Sim said Labuan has 237 companies, Singapore has 180 companies and Hong Kong has 163 companies. In detail, there are 71 captive insurance companies in Labuan while Singapore has 83 and Hong Kong has only four. Overall, there are over 940 licensed institutions approved and regulated by the Labuan Financial Services Authority (FSA) which shows a tenfold increase in the number of licensees since 1996. “Labuan banks own almost US$50 billion (RM233.9 billion) in assets and insurance companies in Labuan have insurance premiums of up to US$1.7 billion (RM7.95 billion),” said the Former Deputy Minister.
Does he not know how one measures financial centres by size of their assets, transactions volume, or profits? Labuan IBFC is really a midget or pygmy compared to Singapore or Hong Kong.
In terms of ranking of financial centres by Global Financial Centres Index 34, Singapore and Hong Kong were ranked at no. 3 and 4 respectively while Kuala Lumpur was at no. 80.
Labuan has yet to achieve the assessment required to be listed in the main GFCI index. Instead, Labuan is listed at no. 4 in the GFCI Associated Centres index.
Meanwhile, Sim said Labuan IBFC contributed more than 50% of Labuan’s gross domestic product (GDP). This reached almost RM5 billion (2019-2020), thus making it the largest contributor to Labuan’s GDP. Malaysia’s GDP in 2023 is expected to be RM 1.6 trillion.
“From this contribution, approximately 12% or RM600 million is the expenses of the Labuan IBFC entity that needs to be spent in Labuan,” he said.
In addition, Sim said Labuan IBFC is the largest white-collar employer in Labuan with a total of 9,198 employees. Does he not know that Singapore employs over 200,000 in its financial centre while Hong Kong has over 277,000 employees in its financial services?
Labuan’s roadmap has to be defined. Is it status quo? Twin with TRX or the planned Johor financial centre? Or, merge with KL? That is the real question not some spurious statistics that justifies its existence.
References:
Labuan IBFC contributes over RM1 bil to fiscal revenue, FMT/Bernama, 23 November 2023
The Global Financial Centres Index 34, September 2023
https://www.hkma.gov.hk
https://business.smu.edu.sg
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